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Are Tar Sands Going the Way of the Dodo?

Shell withdrew its application to extract tar sands from Canada’s Pierre River mine last week. The cancellation is news in itself, but the oil company’s decision to walk away from a massive seven-year project says a great deal about the viability of tar sands generally. Last year, the Canadian Association of Petroleum Producers cut its 2030 tar sands production forecast by 400,000 barrels per day. Last week, the energy consultancy Wood Mackenzie predicted that cash flows from tar sands would drop $21 billion in the next two years. The industry is undeniably shrinking.

Tar sands won’t disappear tomorrow, of course—most of the expense comes in opening the mine, so producers will keep operating their existing mines for several decades. New mines, however, are economically unfeasible. It’s difficult to break even in the tar sands business at current low oil prices. Over the medium term, the lack of pipeline access challenges any prospects for profitability. (That’s why the industry is so desperate for the Keystone XL and Energy East pipelines.) Looking deeper into the future, the specter of carbon taxation is enough to scare energy executives away.

All this is good news for the climate. Tar sands are the most carbon-intensive form of energy on the planet, emitting three or four times more greenhouse gas than conventional crude oil (which isn’t exactly good for the environment either). Here's a brief rundown of all the canceled or deferred Canadian tar sands projects in recent months, and how much carbon they could have pumped into the atmosphere.

Pierre River MineCompany: ShellStated reason for withdrawal: “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible.”Projected barrels per day: 225,000Carbon saved from the atmosphere each day, in tons: 21,000

Corner Oil Sands ProjectCompany: StatoilStated reason for withdrawal: “Costs for labor and materials have continued to rise in recent years…Market access issues also play a role, including limited pipeline access.”Projected barrels per day: 40,000Carbon saved from the atmosphere each day, in tons: 3,700

MacKay River ExpansionCompany: SuncorStated reason for withdrawal: “Cost management has been an ongoing focus…In today's low crude price environment, it's essential we accelerate this work.”Projected barrels per day: 40,000Carbon saved from the atmosphere each day, in tons: 3,700

Joslyn MineCompany: TotalStated reason for withdrawal: “Costs are continuing to inflate when the oil price and, specifically, the [net profit] for the oil sands are remaining stable at best—squeezing the margins.”Projected barrels per day: 160,000Carbon saved from the atmosphere each day, in tons: 15,000

* * *

Tally that up and these canceled or postponed projects represent nearly 95,000 tons of carbon dioxide staying in the ground rather than floating into the atmosphere. That’s the equivalent of taking 6.6 million cars off the road. Murmurs in the energy industry suggest that several other projects will soon be deferred or canceled, as oil prices show few signs of recovering. Stay tuned.

Photo: O.F.E.

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